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GIFTS
OF REAL ESTATE
Eileen
and her husband, Paul, enjoyed their house. They had
raised their three children there and had many family
memories. But after Paul passed away suddenly, Eileen
began to find that the old house was a burden. Without
Paul to take care of things and with their children
involved in their own families miles away, it seemed
that the house was too big, too old and even a bit
lonely.
 Eileen:
"Paul always said that I was the solid
one. If there was a decision to be made I could get
to the bottom line pretty quickly. Well, the bottom
line was that I needed to make a change for a number
of reasons. I decided to move into a smaller place
in town, easier to take care of and one that was part
of a neighborhood where I could make some new friends
and be a part of activities and things. And where
my grandchildren could still come and visit."
"Paul
and I had talked about what to do when we got to this
stage in our lives. I just thought Paul would be here
with me, but that wasn't to be. We had planned and
knew I would have enough money to live comfortably.
Initially we thought I'd need the money from the sale
of the house, but I really don't."
"My
advisor went over the numbers with me. If we sold
it, there would be a large capital gain and taxes
to pay. But by putting the house in a trust that then
sells it, I avoided a taxable capital gain because
when I'm gone the trust goes to charity. The trust
takes the money from the sale of the house and invests
it, and I get the income from the trust for life.
Then, an organization that is doing great things will
receive the remainder of the trust and that will even
save some estate taxes."
Depending
on the circumstances that are involved, gifts of real
estate can be an effective means of planning a gift.
Much of the individual wealth in America is invested
in real estate. While the first thought often is a
home or farm, real estate also can involve a vacation
or second home, an apartment or commercial building,
a shopping center, or undeveloped land.
Often
our real estate holdings, be it our house, a second
home or investment property, is a significant part
of our net worth. Gifts of real estate, therefore,
can enable us to make significant contributions. Each
piece of property and its unique circumstances need
to be reviewed to determine the suitability of the
property as a gift. Generally speaking, a rule of
thumb is that an acceptable piece of property is one
that can be readily sold.
Also,
there are many ways to donate property. It can be
an outright gift, a retained
life estate, or placed
in a trust (such as what Eileen and her advisor
set up). In any case, while we discuss some generalities
here about donating real estate, if you are considering
such a gift, please contact
us to discuss its suitability.
In
addition to making a significant contribution, there
can be other benefits for you:
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There may be a charitable income tax deduction
that would lower your income tax.
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If your property has appreciated in value since
you acquired it, there might be a large capital
gain tax that would result if you sold it. By
donating the property, you may be able to avoid
realizing the capital gains.
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Depending on your state regulations, you may be
able to turn the property into a gift that is
structured to provide income for you and a beneficiary.
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If the property is your home or farm, you may
be able to make a gift of it now and continue
to live in it for the rest of your life and receive
tax benefits the year of the gift.
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If the contribution from your property exceeds
the allowable charitable deduction limits, the
deduction may be carried forward for five years.
There
can be significant advantages to using property as
a charitable gift. Please contact
us to discuss your unique circumstances. Click
here to return to the Planned
Giving Home Page.
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